Selling a Rental Property with Tenants on a Lease

May 24, 2017 | Scot Bolsinger
Last updated Sep 18, 2017

Tenants call your investment property “home,” and as such, raise the bar of challenges when it’s time to put your property on the market.

But with the right plan and partner, these challenges are easily mitigated and turned into opportunities that pump value into your bottom line. Here’s a look at some of the challenges of selling a rental property with tenants on a lease, and a solution that benefits both you and your tenants.

The Challenges

Staging

Making improvements

Showing the home

Risk of straining tenant relationship

Marketing your home to the ideal buyer audience (rental home investors)

Added friction costs if renters move out prior to sale

Roofstock Business Development Advisor Christopher Willard knows very well the challenges of selling tenant-occupied homes. Prior to joining the Roofstock team, he worked in California’s Inland Empire as a senior sales associate for a leading investment property corporation.

“With tenants, you can’t stage the home, and showings are more problematic,” he explains. “The renter could feel threatened and make things difficult. Payments can become late, and the property may not be as well-cared for as a result.”

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Many renters, he adds, can become distressed if they don't know their rights—causing a previously solid tenant/owner relationship to go south. Additionally, since the renters will continue to occupy the home for the term of the lease, this narrows the buyer pool to those seeking an investment property rather than a place to live.

However, waiting until the property is vacant to put it on the market also presents challenges. This can increase “friction costs” such as lost rental income, fixing up the house and paying typical 6% commission fees. All of this puts a 12-14% dent in your bottom line, Willard explains.

Takeaway: If you’re trying to sell a property with tenants on a lease, marketing to buyers interested in purchasing investment rental homes is ideal.

The Solution

Rather than jumping through administrative and operational hoops, consider listing your property with a marketplace created exclusively for buying and selling leased single-family rental homes online. A platform like Roofstock makes it efficient, transparent and easy for homeowners to market and sell their property without lost income or disrupting tenants. Here are a few of the benefits:

“Limiting the disturbances to the tenant is really big for us at Roofstock. We can hand off a happy tenant and make that as smooth as a transition as possible.” —Christopher Willard, Roofstock Business Development Advisor

It gets your listing in front of the right audience. By selling through the exclusive Roofstock marketplace, you’re actively marketing your listing to a dynamic and unparalleled network of rental property investors both large and small.

It’s less work for you: Leave the busywork to Roofstock as we prepare your rental home for a quick and easy sale. We’ll certify your property, create a unique 3-D tour, handle marketing, coordinate all buyer activities, provide a document vault and a whole lot more—from inception to close.

It avoids the challenge of displacing/distressing the tenants: No property showing. No open houses. No disruption. No realtor signs in the yard. A happy tenant helps the sale. Most importantly, the tenants’ relationship with the seller and buyer isn’t unnecessarily strained in the process.

It’s cost-efficient: The traditional way of selling a rental property can be expensive and time consuming, taking months and costing 12-14% in expenses and lost revenue. At Roofstock, our transaction fees are transparent (2.5%) and less than half of what is charged by a traditional broker. You’ll also continue to collect rental income through closing, and save costs on renovations, aesthetic improvements and staging.

Selling a house is a significant transaction, but it doesn’t have to be a headache for the sellers and tenants. At Roofstock, our modern platform offers a stress-free solution to the traditional challenges of selling a rental property with tenants on a lease—and that’s just one of the many upsides to partnering with us.

Now that you understand the benefits of selling your leased rental home on Roofstock, here’s a brief overview of how it works:

About the author

Scot Bolsinger has won more than two dozen press awards writing for major newspapers and online platforms. He is a senior partner with Off Road, an agency helping leaders drive change.